Leadership Shakeup Hits BlackRock CLO Unit

In a matter of just a few weeks, both co-heads of BlackRock’s U.S. collateralized loan obligation-issuing unit have resigned from the firm.

Managing director Scott Snell is expected to remain in BlackRock’s New York office for about two months to help transfer his duties to other staff — including some new recruits. His plans beyond that are unknown.

Snell’s resignation comes as the group’s other leader, managing director Adrian Marshall, is preparing to leave at the end of August to set up a CLO-issuing business called Elmwood Asset Management that will be financially sponsored by Elliott Management. It also follows the 2016 exit of Leland Hart.

Amid rumors that he was pushed out, Hart landed at Wheelhouse Investment a few months later. He joined the board IPC Beverage and later took the top U.S. leveraged-loan and high-yield debt investment role at Alcentra, a CLO-issuing unit of BNY Mellon.

A memorandum that BlackRock circulated to its staff this week emphasized the fact that it still has numerous CLO professionals on board, including Peter Hirsh, Matthew Maxwell and Nidhi Patel. The firm added in the note that chief investment officer Jim Keenan has overall responsibility for the CLO program, which is part of a high-yield debt business overseen by David Delbos and Mitchell Garfin.

BlackRock also said it plans to hire a managing director to take over as U.S. CLO head, along with a structured credit product analyst and a loan-focused researcher.

While the exact circumstances surrounding the exits of Snell and Marshall are unknown, a competing issuer said they may have felt they could gain more compensation and recognition elsewhere. “The company feels the BlackRock name is everything,” and that it could find investors no matter who was in change of its deals, he said.

As for BlackRock’s CLO program, sources said the firm is unlikely to cut back on its deal production but could see its reputation tarnished to a degree. “It would be hard to say there isn’t some disarray,” one investor said, pointing to the senior-level nature of the recent departures.

BlackRock typically has employed a conservative collateral-management philosophy that has kept risk low for investors in the bond portions of its CLOs, at the expense of equity holders’ potential returns. “People don’t like their equity, but I wish I owned debt in every one of their deals,” one buysider said.

Since entering the market in 2004, BlackRock has issued 21 U.S. CLOs totaling $10.5 billion under its Magnetite brand, according to Asset-Backed Alert’s ABS Database. It has completed one such deal for $561.7 million this year. BlackRock also maintains a European CLO program that has produced six offerings totaling $2.9 billion since launching in 2016. That effort has generated two transactions for $988.7 million in 2018.

Snell joined BlackRock from Oak Hill Advisors in 2012. He also has worked at Lehman Brothers and Accenture. Marshall started in 1999, fresh out of college.

CORRECTION (8/2/18): This article has been revised. The original version improperly described the new role of former BlackRock executive Adrian Marshall. He is launching a collateralized loan obligation-issuing business called Elmwood Asset Management that will be financially sponsored by Elliott Management. However, Elliott won’t be involved in day-to-day management of Elmwood, and Marshall won’t be an Elliott employee. The item also mischaracterized the former chain of command at BlackRock. Leland Hart led the firm’s CLO-issuing unit when he resigned in 2016, and didn’t report to Marshall and Scott Snell. Additionally, he later joined the board of IPC Beverage, but never was an employee.